The 3D printing space is fast becoming one of the most exciting arenas. The companies operating in the 3D printing space have been some of the best performers over the past two years. We are familiar with the two big names, 3D Systems (NYSE:DDD) and Stratasys (NASDAQ:SSYS); however, a third name is also making some big waves. ExOne (NASDAQ:XONE) is a relatively new player and it has recently gone public. In my previous articles about the 3D printing industry. I have talked in detail about 3D systems and Stratasys. In this article, I will try to shed some light on the newest player in this arena.
Products, Target Market and Progress
ExOne is a relatively new player compared to the other two heavy weights - the company was formed in 2005 as a spin-off of Extrude Hone Corporation, a developer of nontraditional machining processes and automated systems. The company is currently operating in Asia, Europe and the Americas. Through research and development, the company has achieved considerable success in additive manufacturing. Notable ExOne products include S-Max, S-Print, M-Print and M-Lab. Most of these products are meant for industrial use, and have the capability of manufacturing molds with sand printing and metal and glass printing.
Almost all of the ExOne products cater to the industrial customers, and the company has some of the largest printers available in the market. ExOne's customers are showing considerable interest in the products and the company is receiving new orders. 3D printer sales have gone up for the company in the fourth quarter of the last year. As a result, ExOne was able to post impressive full year results. Another target market for ExOne is the researchers and educational customers - M-Lab is specifically designed to be used in labs and it is one of the smaller printers available in the company's arsenal.
So, there are two sets of target markets for the company: industrial customers, which require ExOne products for rapid prototyping and building molds, and researchers and educational customers, which convert their experiments into reality using ExOne equipment. Industrial customers are a big segment and ExOne's products are getting good response, which should allow the company to grow further in this segment.
On the other hand, research and educational uses of ExOne's products might not be able to provide substantial growth in the long-term. We are seeing a unique business model developing where companies might put up 3D printing shops, which will allow the customers to get their designs printed without buying a 3D printer. Researchers especially might want to save money and get their designs printed on commercial printers rather than spending a substantial amount on their own 3D printers. Furthermore, the educational and research segment is fairly small and it can reach saturation quite rapidly. So, the main growth driver for the company will be the industrial 3D printers segment.
Moving onto the progress of ExOne - the company has come on leaps and bounds in the past six months. ExOne issued shares at $18 per share that are currently trading over $31 per share. The company was able to sell more than double the number of printers (8) in the fourth-quarter than the previous three quarters. As a result, impressive revenue growth has been converted into a substantial price appreciation for ExOne's stock. Year-over-year revenue growth was 87.6% for the company, and it is expected remain between 60% and 80% for the next year. Strong sales growth estimates and future capital expenditures ($50 million planned for the next two years) should allow the company to establish itself as one of the most important players in the market. Parts and materials segment is very small at the moment; there are plans to increase the number of PSCs by ten in the next three to five years, which I believe will be vital for the company. Parts and materials are equally important in the 3D printing industry and will play an important role in the future growth.
Big Boys Vs ExOne
3D Systems and Stratasys have established themselves as the leading players in the market. While Stratasys dominates the industrial market, 3D systems is focusing on the consumer market. Both of these companies have products for business and consumer markets. However, their focus target markets differ from each other. Stratasys' recent acquisition of Object has allowed the company to exploit the lucrative medical applications segment, which is one of the fastest growing segments when it comes to 3D printing applications.
On the other hand, 3D systems is expanding its global reach - after expanding its operations in Turkey, the company has recently expanded its reseller network in Japan. ExOne's target market puts it more in competition with Stratasys than 3D systems. However, there is a lot of room for expansion. At the moment, overall market size is big enough for these players to grow substantially without harming each other. ExOne is considerably behind its two bigger counterparts, and it will take some time for the company to catch the big boys. However, low competition should allow the company to grow well over the next 2-3 years.
Looking at the growth opportunities and the market position of the company, ExOne is an attractive investment. The 3D printing industry as a whole represents an attractive investment opportunity. ExOne is a much smaller player than the other two more established players. Nonetheless, expected revenue growth of over 60% is extremely attractive. The IPO brought in $92 million for the company, which should allow it to have considerable financial flexibility and liquidity. Furthermore, future capital expenditures should also be easily covered with the internally generated cash.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.